The coming USA currency crisis and Argentina

[sesamosinsal]

Sometimes I can not believe what is written without a clue about the history of this country, intervention and foreign interference which was very embarrassing and continues to be in this nation.

This amazes me too. There are tons of books written about this subject, and it's pretty recent history.

Mr. Valenzuela was rightfully criticized for his statements.

 

[sergio]

Lucas, the fact that Argentina's lack of judicial security was criticized by a representative of the Obama administration does not necessarily invalidate the statement. The Obama official was pointing out a fact that I have heard from countless Argentines: there is a general lack of judicial security which scares off potential investors, both Argentine and foreign. Just look at what happened to Argentine bank depositors as a result of the last crisis: dollar accounts were converted into peso accounts at a fraction of their value. Countless law suits began. Some people got their money back, generally only part of it, after having to pay lawyers a percentage and suffering the anxiety of losing what amounted to life savings for many people. The statement of the Obama official would be hypocritical if what he advocated were solely in the interest of the US. The fact is that his criticism is true and the present situation hurts Argentines more than US interests.

 

[steveinbsas]

I can't check right now but I don't recall the dollar amount being stated on post devaluation deeds. Maybe someone in the real estate industry can clarify this.

While I am not in the real estate industry, I checked the "deeds" (the papers from the escritura) for the apartments I bought in 2006 and 2009. The dollar amount is on both of them.

 

[Lucas]

The statement of the Obama official would be hypocritical if what he advocated were solely in the interest of the US. The fact is that his criticism is true and the present situation hurts Argentines more than US interests.

In fact, that's exactly what his statement is and nothing more .... always the same pattern is rigorously followed in this part of the world ..... and with regard if Argentina come out of all this badly hurt, I don't think so this to be the case, this country and their citizens have enough with this kind of policies that continue to arrive on a continuous and uninterrupted flow.

 

[gouchobob]

Lucas, the fact that Argentina's lack of judicial security was criticized by a representative of the Obama administration does not necessarily invalidate the statement. The Obama official was pointing out a fact that I have heard from countless Argentines: there is a general lack of judicial security which scares off potential investors, both Argentine and foreign. Just look at what happened to Argentine bank depositors as a result of the last crisis: dollar accounts were converted into peso accounts at a fraction of their value. Countless law suits began. Some people got their money back, generally only part of it, after having to pay lawyers a percentage and suffering the anxiety of losing what amounted to life savings for many people. The statement of the Obama official would be hypocritical if what he advocated were solely in the interest of the US. The fact is that his criticism is true and the present situation hurts Argentines more than US interests.

I agree. The problem in a nut shell for investors in Argentina is there simply very little legal protection or respect for property rights. Lets assume you invest money in the country and enter contracts for services or the purchase of goods. What happens when the terms of the contract are not honored? Most advanced countries have a court system where you can go to redress these issues, both parties to a contract understand this and most contracts are fullfilled to prevent legal problems. In Argentina you have a very weak court system so a contract here is not worth very much. On top of this you have the risk of arbitrary government actions.

A good example of this is what has happened recently with the beef industry. When Nestor was president he decided to prevent the exportation of beef to keep prices low locally. Basically contracts between buyers and sellers were canceled arbitrarily. Do you think people lost money as a result? Do you think any of these people were able to turn to the court system for protection? What impact do you think this had on other investors considering Argentina?

What has been the impact been on the beef industry in Argentina of these types of actions. In the 70's Argentina was the worlds largest exporter of beef, this year Argentina is expected to be a net importer of beef.

 

[MikeMike]

A couple of years ago I was hunting for property in Costa Rica. During the period of time that I was looking (1-2 months) the dollar took a dive (approx -10%) vs. the colón (local currency). People that were quoting property prices in dollars began quoting prices in colones. This experience leads me to believe that people might switch to their local currency for property pricing if the dollar were to devalue quickly.

Also, the deed to my apartment lists the purchase price in pesos, not dollars.

 

[orwellian]

You can go back through this site and find predictions of an imminent collapse of the dollar from years ago.

Things would, and should have collapsed a long time ago. Pumping in billions of dollars trying to save the banks just delays the inevitable.
Just because it hasn't collapsed yet, doesn't mean it won't. The crisis hasn't gotten better, it has gotten worse, way worse.

Very interesting thread, thanks for starting it Cangurito.
My question is around the subject of 'D E R I V A T I V E S'.
This is supposed to be the real ticking time bomb.
Anyone have any thoughts to share on this?

The problem isn't derivatives, but the FED's decision to bail the banks out. This crazy ponzi scheme should have ended a long time ago. But instead they are now printing money to pay for the losses as no country wants to fund this insanity anymore.

Do you know that the FED is a private bank owned by the very same people who created this crisis in the first place? No wonder they are getting bailed out.

Statistics are fun like that- you can make them say whatever you want. The calculations you list here add all the debt, but forget to count it as assets to someone else.

Mortgage Company A owes $1 to Investment Company B, who owes $1 in taxes to the Government, who owes $1 to a citizen bondholder, who owes a $1 mortgage back to Company A. Your statistics count it as $4 of debt, but its really the same one dollar being passed around. If everyone paid off everyone else, there wouldn't be so much actual debt left. But all that money passing around makes the economy go and keeps people working.

Debt is not necessarily a bad thing. It's true that it does not account for the assets they have. The problem with a lot of debt though, when a person or company defaults, it will have a domino effect. Which is what we will most likely see soon when printing money is not an option anymore.

The dollar has actually strengthened a bit in the last month. It can't go to zero. If the euro keeps rising it will choke off their export industries. Spain already has 20% unemployment and looks a lot like Argentina just before the crisis. All the world's major economies can't simultaneously devalue their currencies. Against what? Martian Pesos? Venutian Dinars?

It can't go to zero? That was exactly what the Germans in the Weimar republic thought. Everything can go to zero. The dollar has been rising, ironically due to the crisis by investors who flee to the temporary safety of the dollar. That probably won't last long though given how much money they are printing.

Just when everyone is saying the sky is gonna fall is exactly the time to buy.

Everyone isn't saying that. In fact the government is saying the opposite. And we all know that the majority of the population are mindless fools who will believe anything that the government is spoon-feeding them with.

To get a better perspective I think you should look at public debt and what percent it is of GDP(a measure of how well the economy can service the debt). If you look at it this way the US doesn't look great but a lot better than many countries including most in Western Europe and nobody is talking about the collapse of the Euro.

Thanks for the "better perspective", but it's all wrong. And your data is outdated.
Italy is at 115%, USA is around 100%, and most of the formerly virtuous countries are also nearing 100%. And public debt alone is not significant, you have to consider aggregate debt (private+public). USA aggregate debt to GDP is a huge 360%. Italy has one of the lowest private debt in the world.

But I agree, a lot of European countries are in deep trouble as well. And the euro isn't looking to good either.

 

[mendozanow]

I have been hearing about the US dollar being wheelbarrow useless since the Vietnam war started before the 60's (only not before because I was too young before then). Will not happen! The US dollar is linked to the most stable society in the world.

Only reason you are hearing it here is because BA is now home to some Yanks too weird even for the guntoters in North Idaho. Spent a summer in Coeur D'Alene!!!!

Serah !!!!

 

[sergio]

Lucas, I don't get your point. Why is judicial security a bad idea? What's wrong with an independent, impartial and honest court system? If the DEVIL (and you may think of the US as the devil) advocated a just court system and reasonable protections I'd have to say he is right. I don't get your complaint unless you simply despise any advice that comes from the US, even if it is good advice!

 

[marksoc]

Why is judicial security a bad idea? What's wrong with an independent, impartial and honest court system?

The two are different things. We like a good justice system. We don't like supposedly "legal" contracts done in the neocons 1990s in Argentina.
When an American says "legal security" we listen "approval to take more money from Argentina", and this is for a good reason.

So, there you have it. We like your money if it creates jobs. We don't like it if you take the gains abroad or the jobs are McJobs. And if in the future we don't like your money no more, and we feel that you cheated on us, we will take it from you. It is not ok for you? So don't bring your money, we DON'T need it (and your dollars are every day less worth of attention).

Welcomed are the entrepreneurs and the innovators, despised are the parasites that want to feed in our low wages. If you want to us to respect you, you must first respect us. After all, this is our country.

(and I will be happy to give recommendations on everything I know about BA. I cannot believe that somebody wrote here that our pizza is not good and that NYC is better. Please, go out of Recoleta sometimes).